NORGES BANK: MNI Norges Bank Review - March 2024: Last Hawk Out The Door?
Mar-22 13:38
EXECUTIVE SUMMARY
- The Norges Bank held policy rates at 4.50%, as unanimously expected. The updated policy path saw only minor changes through 2024, with the Norges Bank’s guidance re-iterating that rates will be “maintained at the current level for some time ahead”.
- The MNI Markets Team had expected a small downward revision to the rate path, so we were surprised that the Q2 2024 rate was only revised 4bps lower to 4.51%, while the 2025/2026 path was revised up to 10bps higher.
- At the press conference, Governor Wolden-Bache confirmed that the first rate cut of 2024 would likely come at the September meeting (rather than November or December).
For our full review, including a summary of 9 sell-side views, see the PDF below:
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US TSYS: Early SOFR/Treasury Option Roundup: Low Delta Put Positions Continues
Feb-21 13:38
SOFR and Treasury options continued to favor low delta puts, put structures overnight as option accts discount the rebound in underlying futures to Friday's pre-PPI levels, positioning for delayed rate cut expectations as the Fed waits for stronger/consistent signs inflation is at bay.
- Projected rate cut pricing near steady to late Tuesday levels: March 2024 chance of 25bp rate cut currently -9.6% vs. -10.6% lat e Tuesday w/ cumulative of -2.4bp at 5.305%; May 2024 at -30.0% vs. -28.9% w/ cumulative -9.9bp at 5.230%; June 2024 -64.9% vs. -65% w/ cumulative cut -26.1bp at 5.068%. Fed terminal at 5.33% in Feb'24
- SOFR Options:
- -7,500 SFRM4 96.00/97.00 call spds 1.5
- 3,500 SFRZ4 98.00/98.25/98.50/99.00 call condors ref 95.64
- 3,000 SFRK4 95.00/95.12 put spds
- 2,000 SFRK4 94.87/95.00/95.12 put trees ref 98.98
- Block 8,000 SFRM4 94.81/94.93/95.00/95.12 call condors, 3.25 ref 94.98
- 7,000 SFRH4 94.75/94.81/94.87 put flys ref 94.7155
- -4,000 SFRU4 95.00/95.12 put spds, 5.0 ref 95.315
- 4,000 SFRM4 95.00 puts ref 94.98
- +2,500 SFRM4 94.87/94.93/95.00/95.06 put condors, 1.25
- Block, +4,500 SFRM4 94.62/94.87/95.00/95.12 broken put condors, 0.75 net vs. 94.985/0.12%
- 1,500 SFRH4 97.50/98.25/99.00 call flys ref 94.7125
- Treasury Options:
- +4,750 TYH4 111 combo, 62 net/put over vs. 110-01/100%
- -3,000 TYH4 108.75/109.5/110.5 broken put trees, 32 vs. 109-30.5/0.50%
- +2,500 TYJ4 107.5/110 put spds vs. TYJ4 113 calls, 22 net ref 110-15.5
US TSY FLOWS: Further pick up in rolls
Feb-21 13:31
- Continued pick up in US rolls especially 2yr and 10yr, with some investors likely taking the opportunity of the less volatile session, given the lack of Risk Events and Data for today.
- TYH4/TYM4 sold at -17.25 in ~17.3k
CNH: USD/CNH Moves Below 7.20 Remain Shallow For Now
Feb-21 13:29
USD/CNH moves below CNH7.20 remain relatively shallow after the USD pared losses in pre-NY trade (e-minis hold a little lower with an eye on Nvidia earnings).
- Lows of CNH7.1811 were printed before the move back to the CNH7.20 zone.
- Initial support (Feb 7 low CNH7.1888) was breached on the move.
- The next bearish target is located at 50-DMA (CNH7.1804), followed by the Jan 31 low (CNH7.1728).
- A breach of the latter would turn the technical tide a little more in the favour of yuan bulls.
- In terms of yuan-specific drivers, the continued swelling of the property development financing “whitelist,” mainland equity bid and related HK-China Stock Connect inflows (highest net buying since Jul ’24 at CNY13.6bn) were supportive for the yuan in Asia hours.
- Participants remain eager for more Chinese market-specific & broader policy support.
- Reports of further trading restrictions showed up after hours, with BBG sources flagging a ban of net equity sales around market open and close.
- CNH TN funding has loosened a little post-Chinese NY.
